Grant Company acquired Lee Company for $600,000 cash.The fair value of Lee's assets was $520,000,and the company had $40,000 in liabilities.Which of the following choices would reflect the acquisition on elements of Grant's financial statements?

Question

Quizplus · Accepted Answer

The acquisition will decrease cash by $600,000,increase "Lee's Assets" by $520,000 (the assets' fair value),increase liabilities by $40,000 (the amount assumed),and increase goodwill for the difference of $120,000.The cash paid of $600,000 is reported as a cash outflow for investing activities.

Grant Company Acquired Lee Company for $600,000 Cash